Liz Truss Announced Tax Policies

Truss has described herself as the “the tax-cutting candidate”, saying “she will hit the ground running by immediately cutting taxes”. She has criticised current taxes as too high: “We have been going in the wrong direction on tax, with the tax burden at its highest in 70 years.” The specific tax policies she has announced so far are:

• ?Emergency budget: Holding a?n emergency budget when she becomes Prime Minister. The date has not been confirmed, but one?rumour?suggested it could potentially be Wednesday 14 or 21 September.?
• ?Corporation tax: Cancelling the planned increase in the corporation tax rate from 19% to 25% from 1 April 2023
• ?National Insurance and Health and Social Care Levy: Scrapping the April 2022 increase in National Insurance and the Health and Social Care Levy
• ?Income tax: Introducing a review to consider an ‘opt-in’ system allowing all members of the same household (not just married couples) to share their full personal allowances (the current limit under the marriage allowance is ￡1,260). (Daily Mail )
• ?Introduction of new investment zones around the UK with “lower taxes, reduced planning restrictions and red tape.” (Daily Telegraph )
• Over the August bank holiday weekend it was reported that Ms Truss has been briefed on proposals to reduce the VAT rate and to increase the personal allowance and reduce the basic income tax rate below 20% (faster than planned by Rishi Sunak) (Sunday Times )
• In the?final hustings in London on 31 August, Ms Truss said that she would introduce “no new taxes”, and specifically no additional windfall taxes on energy companies. She would not confirm yet whether her cost of living support measures would include a reduction in the VAT rate.??She also said that she would run an “unashamedly pro-business” government. (Independent )
• ?Suspending the ‘green energy levies’ on consumers’ energy bills for two years
• ?No new taxes on products high in fat, sugar or salt (Mailplus )

An article in the?Sunday Telegraph ?on 14 August?speculated that if Liz?Truss?becomes the next Prime Minister, she may not implement the Pillar Two global minimum tax.?The report?is based on comments from two of her highest profile supporters who argue that tax sovereignty should not be surrendered – Jacob Rees-Mogg and Simon Clarke (Chief Secretary to the Treasury). However, there have been no?statements on similar lines?by Truss herself, nor any further indicators that this proposal is under active consideration.?

The Institute for Fiscal Studies?estimated?the original package of tax cuts (mainly the CT and NIC rate reversals) would cost more than ￡30 bn, and “possibly considerably more”, depending on the precise nature of some of the policies. It is not clear how the proposed tax cuts would be funded, and the extent to which they would come from cutting spending or increased borrowing. A proposal to reduce the public sector budget by ￡11 bn a year was?announced ?on 1 August, but withdrawn the next day.

Liz Truss is reported to have said that she will not ask the?Office for Budget Responsibility (OBR)?to prepare a forecast in advance of her 'emergency budget' in September, as it will not be a full fiscal event, but some commentators have warned about this approach. (Independent )?

The Treasury usually gives the OBR ten weeks’ notice of a fiscal event, such as a budget, to enable the OBR to provide an independent forecast of the economy and the UK’s fiscal position.?The?Commons?Treasury Committee has?written ?to both the current Chancellor and the OBR to call for forecasts to be undertaken before any decisions to make permanent tax cuts are made. Mel Stride, the Committee Chair, said: “The reassurance of independent forecasting is vital in these economically turbulent times. To bring in significant tax cuts without a forecast would be ill advised. It is effectively 'flying blind’.”

The OBR responded to the Treasury Committee on 26 August – the letter is available?here . The OBR confirms that it has already started preparatory work, and if asked by a new Chancellor to prepare a forecast for 14 or 21 September taking into account new policies, it would be possible to do so, albeit with a reduced scope due to the accelerated timetable.